The State should curtail the rampant increase of aluminium production
by small-scale enterprises to prevent over-production.
China, which imports
one-fifth of its aluminium annually, should not bridge the
supply gap by expanding small-scaled production, said Zhao
Jiasheng, office director of the China Nonferrous Metals Industry
Association.
According to Zhao,
the rapid increase of small-scaled production would dampen
the market because imports, also of high quality, are hardly
more expensive than domestic aluminium under the current border
trade policies.
China cut the border
tariff and value-added tax on aluminium by half last year.
Zhao said that
because of local government schemes, the national production
capacity is expected to bubble by more than 5 million tons
by 2005, much more than the central government's planned total
of 3.2 million tons.
China last year
increased its aluminium production capacity by 500,000 tons,
a 17 per cent rise from 1999. Another 550,000 tons will be
added to the total this year, he said. Most of what is made
in the country has a low added value and is thus not very
profitable.
The situation is
getting more serious as more than 10 provinces and regions,
such as the coal-rich provinces of Shanxi and Henan, are regarding
nonferrous metal industries, including aluminium, as their
pillar industries for the 10th Five-Year Plan period (2001-05).
Kang Yi, chairman
of the association, attributed local governments' enthusiasm
for expanding the production of aluminium to the roughly 10
percent price hike last year from the previous year.
Small coal-fuelled
power plants, which do not transmit their electricity to power
grids because of their lack of competitiveness resulting from
high production costs, often operate their own small aluminium
plants.
Electricity costs
make up over one-third of aluminium production costs.
"The government
encourages aluminium plants to expand their production capacity
to sharpen their competitive edge, but does not want new small
plants to be launched," Zhao said.
Statistics indicate
that the average annual production capacity for one plant
in China is 24,000 tons, much less than the world's average
of 200,000 tons.
Aluminium plants
with an annual production capacity of less than 50,000 tons
account for 89 per cent of the national total.
Kang said the association
is conducting researches and is calling for the government's
attention.
Experts said, however,
that the situation is hard to control because small-scaled
plants, as the only type affordable to local governments and
communities, are needed to make money for the local economy.
"But if over-production
cannot be controlled, many enterprises will become bankrupt
in years, especially when foreign giants come in after China's
entry into the World Trade Organization," said Guo Shengkun,
general manager of the Aluminium Corporation of China.
(China Daily 04/09/2001)
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